NEW YORK, Oct 17 (Reuters) - The S&P 500 rose for the thirdconsecutive day on Wednesday after housing starts hit afour-year high, but the Dow was weighed down by IBM after itposted weak revenue.

Homebuilders' shares led gains after the Commerce Departmentsaid groundbreaking on new homes jumped 15 percent in September,the quickest pace since July 2008. The surge in housing startswas viewed as evidence that the housing sector's fledglingrecovery is bolstering the recovery of the broader economy.

The PHLX Housing Index rose 2.9 percent.

International Business Machines Corp was a notabledisappointment after the company said revenue fell short ofexpectations. The stock dropped 4.9 percent, exerting an81-point drag on the Dow industrials. IBM has an outsizedinfluence on the Dow, which is a price-weighted index. IBM'sstock closed at $200.63.

Intel Corp, the world's largest chipmaker, lost 2.5percent to end at $21.79 a day after giving a weak revenueoutlook. The S&P technology sector index slid 0.8percent and ranked as the only loser among the S&P 500's 10industry sectors on Wednesday.

Although it's still early in the earnings season, theresults have been a bit better than anticipated. Fourteenpercent of S&P 500 companies have already reported earnings, andof those companies, 65 percent have beaten analysts'expectations, ahead of the long-term average of 62 percent.

"The results are just not that bad at all. And wheneverpeople begin to get too far in one direction - meaning earningsare going to be terrible - generally reality is better thanthat, and we are seeing that now," said Tim Ghriskey, chiefinvestment officer of Solaris Group in Bedford Hills, New York.

According to Thomson Reuters data through Wednesdayafternoon, quarterly earnings for S&P 500 components are nowexpected to fall 1.7 percent from a year ago, a modestimprovement in expectations from a forecast for a drop of 2.3percent earlier in the week.

Bank of America shares fell 0.2 percent to $9.44after the second-largest U.S. bank reported that it earned just$340 million during the quarter, down 95 percent from theyear-ago period. The bank also said it had provided $4.75billion in first lien principal reductions and expected to meettotal obligations within the first year of the National MortgageSettlement.

"For the financials, the bar was set very low. They toppedthe bar, but we didn't get a nice tailwind frompost-announcement conference calls," said Fred Dickson, chiefmarket strategist at D.A. Davidson & Co., in Lake Oswego,Oregon.

The Dow Jones industrial average rose 5.22 points, or0.04 percent, to 13,557 at the close. The Standard & Poor's 500Index gained 5.99 points, or 0.41 percent, to finish at1,460.91. The Nasdaq Composite Index advanced 2.95points, or 0.10 percent, to close at 3,104.12.

Over the past three days, the S&P 500 has gained 2.3 percent- its best three-day advance in more than a month. The benchmarkindex is now just 0.33 percent off its 2012 closing high.

After the bell, shares of Ebay slipped 0.5 percentto $47.95 following the release of its results. The stock endedthe regular session at $48.20, off just 0.08 percent.

Shares of American Express fell 0.6 percent to $59after the bell after the company said third-quarter profit roseonly marginally as cardmembers reined in their spending. American Express, a Dow component, closed onWednesday at $59.37, up 1.3 percent in regular trading.

Among Wednesday's biggest losers during the regular sessionwas Apollo Group Inc, which plunged 22.2 percent toclose at an 11-year low of $21.40. Shares of Apollo, the ownerof the University of Phoenix, the largest U.S. for-profitcollege, fell after the company forecast a weak 2013 andannounced new student sign-ups fell 14 percent for the fourthquarter ended Aug. 31.

Apollo said it would save $300 million by fiscal year 2014by cutting jobs and shutting half of its University of Phoenixlearning sites.

ASML, the world's leading chip gear maker, agreedto buy Cymer - its key supplier of a light-basedtechnology crucial to making a new generation of much smallerand smarter chips - for $2.5 billion. Cymer's stock soared 49.4percent to $71.45. In contrast, the U.S.-listed shares of ASML dropped 6.5 percent to $50.08.

Volume was roughly 6.3 billion shares traded on the New YorkStock Exchange, the Nasdaq and the NYSE MKT, compared with theyear-to-date average daily closing volume of 6.51 billion.

Advancers outnumbered decliners on the NYSE by a ratio ofmore than 2 to 1. On the Nasdaq, five stocks rose for everythree that fell.